Breaking News: 30% Tax Break for New Equipment Purchases
By Joe Bucolo | Prudent Partners Pty Ltd

I was recently told about a tax break that can be very beneficial for pizza shop owners. I contacted Kerry King and he referred me to Joe Bucolo of Prudent Partners to get a more clear picture of how it works and here is what he had to say. As part of its latest economic stimulus package, the Federal Government is offering small businesses a tax deduction of 30% of the cost of new capital equipment (or new expenditure on existing equipment) worth more than $1,000 so long as it is purchased after 12 December 2008 and before 30 June 2009 and installed before 30 June 2010. The special tax break is being offered to business if they buy new equipment (or new expenditure on existing equipment) - second hand is excluded - ranging from computers and fax machines to cars and industrial machinery. The tax deduction will be available for any business with a turnover of $2 million a year or less.The deduction will fall to 10% for equipment bought from 1 July 2009 until the 31 December 2009 for installation by 31 December 2010. Bigger businesses with a turnover of greater than $2 million will be eligible for the same tax deductions but will have to spend at least $10,000 on new equipment (or new expenditure on existing equipment) to qualify. Example: A Pizza business with an Annual Turnover of $600,000 buys a new oven on 20 May 2009 at a cost of $10,000. The oven is delivered and ready for use on 20 June 2009 and has an effective life of 10 years. The business will be entitled to claim the 30% deduction because: • an oven is a depreciating asset for which the business would be entitled to claim a deduction; • the business started to hold the oven between 13 December 2008 and the end of June 2009; and the oven was installed ready for use before the end of June 2010. • the deduction will be 30 per cent of the oven’s cost – that is, $3,000. When lodging its 2008-09 income tax return the business will be able to claim this $3,000 deduction in addition to the usual depreciation deduction in respect of the oven, given it has an effective life of 10 years.

If the business had delayed this investment until after 30 June 2009 – but had it installed ready for use before the end of December 2010, 10% deduction would apply. It would be able to claim a deduction of $1,000.

If you would like to learn more about tax incentives contact Joe on 07 3252 4655 or email jbucolo@prudentgroup.com.au. Joe is Tax Partner at Prudent Partners Pty Ltd, 909-911 Ann Street, Fortitude Valley, Qld 4006.